Taxes nowadays seem to overflow in American society and in consumers' lives. Food and clothing purchases, as well as income, are all taxed. Real estate purchases are not exempt from taxation.
Many peoples' main goal of home ownership involves making a profit off the home they purchased in a subsequent sale. One main reason to do this is to be able to save up enough for a larger down payment on the purchase of a new home. If you make a hefty profit as a result of the sale of your old home, though, you might be disappointed to be taxed on this excess of money if it makes it harder to purchase a new home. In a situation like this, it's worth it to familiarize yourself with the provisions in Internal Revenue Code 121.
IRC 121, as Internal Revenue Code 121 is colloquially called was the reason that the Taxpayer Relief Act of 1997 was repealed and replaced. IRC 121 allows homeowners who sell their former homes at a profit to exempt that money from taxation, consequently allowing it to be put to other uses.
There are, of course, some restrictions. First, IRC 121 requires that the home you're selling in favor of a new home be your primary residence in order for you to qualify for the tax exemption. Second, you as seller must have lived in the home for two of the last five years to qualify. The amount that can be exempted must also not exceed $500,000 for couples and $250,000 for an individual. Basically, if you made less than those amounts above and beyond what you originally paid for the home, your earnings will be exempted from taxation.
Consequently, you should make a point to research IRC 121 as it is both useful and important. If the market in which you bought your home was weak and a subsequent sale brings you a profit, researching and understanding IRC 121's terms is a wise choice on your part. A certified tax professional should be able to explain some of its terms even more thoroughly if you find yourself unsure about anything related to this tax exemption.
Many peoples' main goal of home ownership involves making a profit off the home they purchased in a subsequent sale. One main reason to do this is to be able to save up enough for a larger down payment on the purchase of a new home. If you make a hefty profit as a result of the sale of your old home, though, you might be disappointed to be taxed on this excess of money if it makes it harder to purchase a new home. In a situation like this, it's worth it to familiarize yourself with the provisions in Internal Revenue Code 121.
IRC 121, as Internal Revenue Code 121 is colloquially called was the reason that the Taxpayer Relief Act of 1997 was repealed and replaced. IRC 121 allows homeowners who sell their former homes at a profit to exempt that money from taxation, consequently allowing it to be put to other uses.
There are, of course, some restrictions. First, IRC 121 requires that the home you're selling in favor of a new home be your primary residence in order for you to qualify for the tax exemption. Second, you as seller must have lived in the home for two of the last five years to qualify. The amount that can be exempted must also not exceed $500,000 for couples and $250,000 for an individual. Basically, if you made less than those amounts above and beyond what you originally paid for the home, your earnings will be exempted from taxation.
Consequently, you should make a point to research IRC 121 as it is both useful and important. If the market in which you bought your home was weak and a subsequent sale brings you a profit, researching and understanding IRC 121's terms is a wise choice on your part. A certified tax professional should be able to explain some of its terms even more thoroughly if you find yourself unsure about anything related to this tax exemption.
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